question about closing out a LEH short

for the rec, i am NOT short, but someone sent me this question – anyone have an answer? ======================== LinkedIN ************ has sent you a message. Date: 9/14/2008 Subject: Hey ********* How are you doing? Let me know the next time you are in NYC. Quick question for you: What happens to a stock (ex: Lehman Brothers) if I had a short position in LEH and the company files for bankruptcy over the weekend? How do I settle my trade and book my profit? I think if trading continues on the next trading day, I should be able to cover my short by buying back the stock in pennies but I was not sure. ******************************* I assume that if trading continues monday, one could cover. but what happens if trading is halted and never re opens?

it will reopen maybe not on the nyse but somewhere…i think worldcom traded up until a couple months ago…

MFE is right, you could probably get rid of it on an ECN like Arca or Instanet if it doesn’t trade on the NYSE. If they wipe out the common, then it just means you don’t have to buy back the shares and return them to your broker.

If you think common gets wiped out, don’t cover your short (aka buy back the shares) because your profit is tax-free!

LEH will still be trading tomorrow. The guy will have no trouble exiting his short position.

But if it didn’t you wouldn’t have to cover your short. Virgin says he is still short Braniff.

thanks guys, i forwarded all of this to the guy.